Updated - the Massachusetts Millionaire Taxes

Quick Update:

In Massachusetts, there are two millionaire taxes.

• The first is an income tax on income over $1mm.
• The second is an estate tax, recently revised from $1mm to $2mm. Read more about it here.

Both are avoidable with a little bit of planning. Pay a little to competent legal professionals, or pay a lot to the Commonwealth if you're a Massachusetts resident.

Action Items:

If you work with business owners in states that have an inheritance tax, get a handle on it, talk about it, build out your network further.

These taxes in Massachusetts are both voluntary. Planning can usually help to avoid them.

Original Article below.

Looks like the Millionaire’s Tax passed in Massachusetts.??We can wring our hands and cry about it, or we can get to work.

I know this to be true - if you toss a rock into a stream, the water will quickly figure out how to move around it.?

There are likely a myriad of solutions individuals can work through with their planners, especially their tax advisors.?Here are two ideas for the business market:?

• Deferred compensation isn’t earned income, it is instead deferred pre-tax, received taxable in your state of residence.?Be careful with this one – doesn’t usually work for owners, doesn’t generally provide perfect income control – but maybe that house up in New Hampshire suddenly looks more appealing, am I right?
• Ownership is different from control, but most humans don’t get that.?An individual can control an asset inside an estate planning trust or an employee stock ownership plan, for example.

By the way –

• The estate tax in Mass hasn’t changed, either -- $1mm of net worth costs $36,500 in taxes if you die in the Commonwealth (without planning).??Death might not be imminent for most of us, but it is an absolute certainty.?Do the planning.
• The Federal estate tax is due to sunset in 2026, from a high number this year to a much lower number in 2026.?If intend to be alive a few years from now, please do the planning.

Always seek the help of a licensed tax professional – these maneuvers (and others subsequently proposed) are going to receive a lot of scrutiny.???As a high net worth individual (or a high earner, not rich yet) it is important to have the right people in your corner.?They’re worth what you pay them.

Noel Anderson

Vice President of Executive Benefits

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